Q1 2016: SMB Job Generation Outlook Report

The SMB Job Generation Outlook examines executive perspectives on topics facing America’s small to mid-sized business market, including the economy, employment trends, political and sociological environments and the tangible impact these issues have on SMB business and employment planning.

Q1 2016: American SMBs report stable, optimistic positioning

For many years, the American small to mid-sized business market has both received and generally embraced the moniker of “Job Generation Engine” for the U.S. economy. From Manufacturing and Construction to Business Services and Health Care, SMB companies fill every industry pillar and help fuel local economies in every corner of the American marketplace. In recent decades, while corporate America struggled with declining profits and downsizing measures, many small to mid-sized businesses experienced renewed opportunity for growth. Since the 1970s, U.S. SMBs have been credited with creating the majority of all net new private sector jobs.
Today, SMB executive leaders are faced with a host of interwoven opportunities and challenges. Some are decades-old and considered ever-present business “facts of life” while others have emerged and grown in influence during recent years. Combined, these forces serve as powerful indicators to the health and growth potential of the U.S.’s critical economic and employment SMB engine.

Since 2012, Lucas Group has conducted the SMB Job Generation Outlook in an effort to understand how these factors influence and impact the choices that small to mid-sized business leaders make, and how economic, social and political landscapes shape current and future business planning. Focused intentionally on C-level executives and business owners, the survey’s leader-centric approach supports reliable, trusted reporting on plans and expectations, as experienced from the decision-maker perspective.

Each quarter, the Outlook asks executives a baseline question regarding their company’s current overall health and standing, capturing a broadspectrum view of how SMBs see themselves in the marketplace. From privately held businesses with a few hundred employees to mid-market public corporations employing thousands, the vast majority of SMB executives report their companies to be in either a stable or growth position – consistently nearing or surpassing 90% each quarter.

Economic self-confidence drops; Optimism for nation grows slightly

2016 began with both the lowest economic self-confidence in the survey’s history and the narrowest gap between nation and company. While from quarter to quarter, economic optimism has shifted slightly up and down – both at a national and company specific level – Q1 2016 saw a marked decrease in SMB economic self-confidence as compared to the national landscape.

Over the past three years, executives participating in the Outlook have consistently shown more optimism regarding economic prospects for their own companies compared to the national economy. Their views in early 2016 continued this pattern, with 61% reporting confidence about their own company’s economic prospects compared to 56% saying they are somewhat or very optimistic about the overall U.S. economy’s prospects.

When considered in a snapshot view, company specific optimism remains higher in Q1 2016 than national optimism, with a 5% difference. That difference, however, has drastically narrowed over the past three years. Across all quarters in 2014, an average of 71% of SMB respondents were optimistic about their own company and 52% shared confidence in the nation’s prospects – a 19% difference. In 2015, that gap narrowed to 13%, with an average of 69% of SMB executives expressing confidence about their own company’s economic prospects, compared to 56% reporting national optimism.

While SMB executives have consistently held national economic prospects in higher stead than their own company’s prospects, the reverse has been true regarding the prospects of job growth. Despite fewer executives attributing the term “Job Generator” to themselves than to their overall market segment, SMBs have regularly reported feeling more optimistic about their own company’s near-term job growth than the nation’s.

This pattern continued into Q1. Fifty-seven percent reported self-confidence in their own company’s near-term job growth and slightly fewer (54%) said they were optimistic about national job growth. As with economic optimism, however, Q1 confidence about job growth also experienced a gap closing between company and nation. In 2014, an average of 55% of SMBs were confident about their job growth versus an average national optimism of 46%. This 9-point gap narrowed to six points in 2015, with an average of 57% reporting self-confidence and 51% reporting national confidence.

In the opening months of 2016, the gap closed to only three points. This narrowing was driven by an increase in national optimism about job growth rather than any measurable rise in SMB self-confidence.

Early 2016 hiring plans down as SMBs report suitable staffing levels

Three-quarters of SMBs surveyed in the Q1 2016 Outlook deem their current staffing levels appropriate. General satisfaction regarding adequate current workforces, however, do not account for planned future growth. Despite only 14% of Q1 respondents saying their companies were currently understaffed, more than one-third plan to hire in early 2016. Nearly half plan to hire sometime during the year. These plans reveal a desire to grow and hire throughout the year, even if present-day workforce levels are considered appropriate to current business needs.

The percentages of respondents who report planning to hire, downsize or remain at similar staffing levels closely mirror the positioning statements discussed earlier in this report. Similarly, while near-term hiring plans reported in the SMB Job Generation Outlook often closely reflect how SMB leaders feel about their company’s current market position, longer-range hiring plans tend to be more optimistic in nature and more representative of how SMB executives report feeling about job growth prospects in general.

Of note, reported Q1 near-term hiring plans (35% in Q1 2016) are down from the past two years. In Q1 2014, 45% of SMBs planned near-term hiring, with a response rate that continued to average slightly over 45% throughout the year. In 2015, 43% of Q1 respondents reported early year hiring plans (the lowest reported in each of 2015’s four quarters), and for the year, near-term hiring plans averaged almost 47%.

In terms of longer range hiring, 48% of Q1 2016 leaders said they plan to hire sometime during the year, down seven points from Q1 2015 and down three points from Q1 2014. We will continue to monitor reported hiring plans throughout 2016 to analyze if current Q1 drops are temporary dips in reported planning or early signals of longer-lasting downward growth trends.

Each quarter, the SMB Job Generation Outlook seeks to capture and track most pressing challenges for small to mid-sized businesses. When the Outlook began in 2013, health care costs were revealed as the number one concern, and this carried into the first quarter of 2015 with 31% of executives reporting health care costs as their top business issue. Competition was the second biggest challenge for SMBs in Q1 2015 at 29%, and talent availability came in third at 21%.

Those three challenges represented 81% of top business issues for SMBs in Q1 2015. The same three challenges also represented 81% of top business issues in Q1 2016; however, the issues traded places. In Q1 2016, talent availability ranked the number one concern at 29%. Domestic and international competition was the second largest issue at 27% and health care costs came in third at 25%.
Half of the survey’s Q1 2016 respondents reported hiring to be difficult or extremely difficult, and four in ten say hiring is more difficult now than one year ago. As has been reported in previous quarters, functional positions including Information Technology, Sales and Finance continue to present hiring challenges for SMBs.

Impacts of hiring challenges & changing workforces on SMBs

To address talent acquisition challenges, SMBs primarily report increasing compensation packages (salaries, bonuses and benefits), engaging professional recruiters, enhancing professional networking leads and promoting job openings through advertising. These ramped-up recruiting initiatives coincide with an increasing level of impact being felt by SMBs from the continuing flow of Baby Boomers out of the workforce and into retirement. The use of compensation as a talent acquisition tool was regularly captured via the Outlook survey throughout 2015, and freshly reported changes in last year’s take-home wages appear to reflect SMB usage of compensation in efforts to both attract new hires and retain the talent they currently have.

Addressing Talent Acquisition Challenges

Macro economic and political issues influence SMB business planning

From quarter to quarter, the SMB Job Generation Outlook evaluates a series of economic, employment and political drivers influencing the small to mid-sized U.S. business market. The survey’s goal is to help the marketplace monitor, compare and better understand the many pushes and pulls experienced by SMB decision-makers across the country. While SMB leaders consistently report a general pessimism about Washington politics and Congressional actions, other “hot topic” discussions – including the Affordable Care Act, immigration and minimum wage – present varying degrees of impact and concern to SMB companies.

Health Care Regulations and Rising Health Care Costs

Wages, Financial Markets & Federal Reserve

Governmental Impacts on the SMB Marketplace

Q1 2016 SMB Job Generation Outlook Respondent Data

The SMB Job Generation Outlook is an innovative approach to traditional hiring and employment surveys designed to capture the visions and priorities of U.S. SMB executives. Each quarter, the Outlook reports on recent and planned business activities as well as gathers opinions related to workforce and political environments. Since early 2013, Lucas Group has polled almost 3,000 SMB executives from across the country and a cross-section of industry sectors. From family-owned small businesses with several hundred people to mid-market corporations that employ thousands, the Outlook seeks to uncover what the SMB market most wants, needs, worries about and forecasts for the future—the nation’s and their own.

Lucas Group is the North American leader in executive and management recruiting, and an expert on the U.S. employment and hiring economies since 1970. With more than 350 Associates and 15 offices nationwide, Lucas Group serves small to mid-sized businesses and Fortune 500 companies. A modern business culture, highly consultative recruiting methodologies, unrivaled talent resources and ongoing research initiatives have valuable impact on markets and clients. The Lucas Group SMB Job Generation Outlook is an example of the firm’s commitment to understanding clients’ challenges and opportunities, the outlook for small businesses, and helping companies make sound decisions. Lucas Group’s focus spans seven practice areas, including Accounting and Finance, HR, IT, Legal, Sales and Marketing, Manufacturing and Military Transition.

Polaris Marketing Research is the full-service marketing research firm commissioned by Lucas Group to conduct employment survey research for the SMB Job Generation Outlook. Polaris has provided industry-leading data collection and analysis services for more than 25 years. The firm employs the latest technologies and methodologies to capture quantitative research, and uses impeccable qualitative research expertise to extract meaningful data in both the traditional and online research environments. Polaris specializes in conducting satisfaction surveys and loyalty measurement programs that uncover and track factors affecting customer and employee satisfaction, loyalty, retention, awareness, perception and behaviors. Founded by Jan Carlson in 1989, the Atlanta-based firm is also an expert in brand research and product development.

Lucas Group makes the SMB Job Generation Outlook available to print, broadcast and electronic media outlets every quarter, free of charge. These latest survey results are of significant value and interest to the business, economic and employment sectors, and far beyond. The market for the report has expanded beyond the small business arena and its executives and hiring managers, and is now also anticipated by job candidates, economists, universities and many other audiences. Lucas Group distributes a news release each quarter introducing the latest report. If your news outlet would like to automatically receive these latest small business economic trends, please send an email to: PR@lucasgroup.com